”If countries fail
at creating jobs, their societies will fall apart. Countries, and more
specifically cities, will experience suffering,
instability, chaos, and eventually revolution. This is the new world that
leaders will confront.
What would fix the
world – what would suddenly create worldwide peace, global wellbeing, and the
next extraordinary
advances in human development, I would say the immediate appearance of 1.8
billion jobs – formal jobs.
Nothing would change the current state of humankind more.”
– Jim Clifton in The
Coming Jobs War.
This message should act as a stern warning
to the ANC-SACP-COSATU alliance and Jacob Zuma’s government. Unless they design
and implement measures friendly for creating jobs, the National Democratic
Revolution so many of them are wedded to will end up being very undemocratic
and threaten South Africa’s future as a nation. Instead, we will become a
failed state.
How to create jobs, therefore, is the most
pressing problem the country faces today. This is highly contested political as
well as economic territory.
The National Development Plan, which the DA supports,
envisages 11 million new jobs by 2030, but our track record in the past 5 years
has been very poor. Before the 2008-09 global recession, Stats SA figures show
an unemployment rate by the narrow definition of 21.9%. It now sits at 24.1%.
By the wider definition, which includes those who have given up looking for work, it is 34%. If
this trend continues, South Africa is in big trouble.
David Birch, in his 1979 report The Job Generation Process, coined the
term Gazelle companies, meaning those small, nimble companies with a high
potential to create jobs. Birch estimated that gazelle companies account for only
4% of US companies but 70% of new jobs.
The formation of the Department of Small
Business Development must be seen in this context. As a new ministry in the
Economics Cluster, it has a very specific task: to formulate and implement
policies that maximise job creation.
The DA is very clear about the need to
review not just the legislative and policy framework within the new department,
but in all departments which have an impact on job creation. This will be a
severe test for the Minister, who will come up against entrenched interests
which are inherently job destructive rather than job creative.
The challenge facing the Minister Lindiwe
Zulu is to be the first enterprise-friendly ANC minister in Jacob Zuma’s
cabinet. I have publically stated that I will support the Minister, if she
shows a willingness to adopt this approach. As Shadow Minister I will play the
role of watchdog and continually press for the needs of small business to be
paramount in the formulation of new policies and regulations. This is the only
chance South Africa has of creating the jobs we so urgently need.
What
is the current status of the Department of Small Business Development?
The Minister presented her vision for the
department and its mandate to the Portfolio Committee at its first meeting on 2nd July, with a follow-up
presentation on 20th August. A number of Acts will fall under the
department’s purview, the main ones being the National Small Business Act of
1996, amended in 2004, and the Cooperatives Act of 2013.
The Minister also indicated that she would
be looking at legislation and regulations falling under other departments if
they have an impact on small business. Perhaps the most important of these is
the Labour Relations Act. However, comments from her department during the
recent metal workers strike do not suggest it has the appetite to tackle labour
laws that deter job creation.
Most of the functions of the department are
being transferred from the DTI (Small Enterprise Development Agency, Incubation
Support Programme, Cooperatives Support Programme) and the DED (Small Enterprises
Finance Agency). The department has an acting Director General with a Deputy
Director General seconded from the DTI. There appear to be turf wars between
the DSBD and the DED which is reluctant to let SEFA go as this will further
denude it of any meaningful functions.
Small business has always been the step
child in the DTI, receiving only 10% of the DTI’s budget. Its performance has
been questionable, with SEDA spending most of its time and budget supporting
micro and survivalist businesses with little impact on job creation. By its own
admission, support for cooperatives has been disastrous, with most newly formed
cooperatives ceasing to exist when grant funding dries up. It is too soon to
assess the impact of the incubator support programme, which has taken more than
two years to get off the ground and less than 10 DTI-funded incubators are operational.
SEFA, which was formed in 2012 with the
merger of Khula Finance and a number of smaller institutions, has struggled to
gain traction. Like SEDA, its focus has been survivalist businesses which are
funded through micro-finance intermediaries with loans averaging around R5000.
SEFA’s SME beneficiaries create on average only 1,5 jobs each with the funding
they receive, a hopelessly inadequate outcome on expenditure in the 2013/14
financial year of R808 million. 98,3% of SEFA’s 46,182 loans were disbursed by
micro-finance intermediaries, charged at very high interest rates. Just 0.5% of
SEFA’s loans were made directly, averaging around R1 million per loan.
As President Zuma said in his State of the
Nation speech, South Africa’s development finance institutions need a big shake
up and SEFA is in urgent need of remedial surgery.
In my first one-on-one meeting with
Minister Zulu on July 3rd she told me her goal was for the new
department to be up and running within 100 days of her taking office. She has now
been in office 120 days and her department is still far from being functional. In
its most recent statement its spokesman said the were now aiming to be up and
running in November.
Priorities
for the Department of Small Business Development
Since my appointment as Shadow Minister for
Small Business Development on June 5th I have focused on assessing
the state of the small business development landscape in South Africa. On
Thursday and Friday this week the Portfolio Committee is holding a workshop
where we will deliberate on the mandate, strategy and action plans for the
department. I will be ready to make my recommendations and I am pleased to be
able to share some of them with you today. Most of these are within the
department’s mandate and can be achieved within the government’s 5 year term.
1.
Give unequivocal support to the vision
and strategies embedded in the National Development plan as the overarching
guideline for the Department.
2.
Become the champion of South
Africa’s Entrepreneurial Ecosystem by making a clear statement that she intends
to break from the past and establish a policy framework for small and medium businesses
to grow, thrive and create jobs
3.
Work towards establishing an
enabling environment conducive to entrepreneurial and innovative business
creation, including means of bridging the gap between investors and
entrepreneurs
4.
Review the classification of
small businesses to include not just their turnover and number of employees but
also their stage of growth and motivation for being in business. These can
include start-ups, informal, entrepreneurial, survivalist, lifestyle, mature and
high-growth potential businesses
5.
Establish policy instruments and
agencies that are designed around each category of small business, which
require very different sorts of intervention
6.
Develop an outcomes rather than
an activity based approach in all financial and non-financial support provided
to small business
7.
Assess all government measures and
support mechanisms by the number of jobs created and the economic value added,
channelling the majority of funds and resources where they have the greatest
impact
8.
Make a clear distinction
between support and funding of survivalist businesses (which arguably should be
overseen by the Department of Social Development) and those of high growth-potential
(gazelle) businesses
9.
Motivate for an army of
business mentors to be established that are made available to small business
incubators
10.
Compress existing instruments
for small business support at national, provincial and local government levels
into one nationally directed but locally delivered set of instruments and
agencies
11.
Establish one-stop small
business service centres or help desks in each municipality staffed by trained
personnel from SARS, SEFA, CIPC and SEDA to speed up business registrations and
handling of tax queries, finance applications and requests for support
12.
Keep the department’s
bureaucracy to a minimum and outsource the bulk of support and implementation work
to the private sector
13.
Create a Red Tape Reduction
Unit, following the example of the Western Cape Provincial Government, with a
mandate to root out wasteful and pointless regulations that strangle small business
14.
Review the Labour Relations Act
with the aim of easing regulations on small business
15.
Review the recommendations of
the Human Resource Development Council’s Enabling Entrepreneurship Technical
Task Team, March 2014, on introducing entrepreneurship into the school, FET and
higher education curriculum
16.
Review the SiMODiSA Start Up
position paper of June 2014 which is possibly the most comprehensive
research-based study yet produced of how to accelerate the growth of small and
medium sized enterprises
DA
launches the DA National Small Business Tour
Over the next three months, my deputy Henro
Kruger and I will be visiting every province in the country conducting
oversight visits to assess the state of small business in South Africa. We will
be visiting government-run small business support centres, including SEDA and
SEFA offices and local and provincial government departments and agencies. We
will meet with small business owners, local chambers of commerce,
representatives of small businesses in townships and per-urban areas, as well
as rural South Africa which is sorely neglected as a source of innovation and
entrepreneurship.
The tour will enable us to form a picture
of the needs of small business, and to show business owners that the DA is the
party of small business, enterprise and job creation. As proof of this, we can
point to the Western Cape which under a
DA-run governments shows the country’s lowest unemployment rate at 22% compared
to the national rate of 34%.
We will report on cases where business
owners are facing difficulties or are being hampered by red tape, bullying
unions or big companies that refuse to include them in their supply chains.
When we uncover corruption, tendrepreneurs
and contracts for pals we will expose them. Crony capitalism is the antithesis of the Open
Opportunity Society for All espoused by the DA.
We look forward to sending in a regular
flow of stories and case studies which you in the media can use to inform your
audiences about how implementing DA policies will lead to the economic future
we dream about, but which under ANC rule remains just a dream.
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